Posted
by
Unknown Lamer
on Monday March 24, 2014 @09:04PM
from the ruining-everything-with-math dept.

holy_calamity (872269) writes "Using game theory to analyze the rules of cryptocurrency Bitcoin suggests some changes are needed to make the currency sustainable in the long term, reports MIT Technology Review. Studies from Princeton and Cornell found that current rules governing the mining of bitcoins leave room for cheats or encourage behavior that could destabilize the currency. Such changes could be difficult to implement, given the fact Bitcoin — by design — lacks any central authority."
The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.

So the past 12 months of theft, fraud, corruption, system flawes and volatility in the bitcoin system are all just stories made up by government in your eyes? It is unbelievable the paranoia and conspiracy theories people are willing to resort to rather than believe the evidence in front of them.

Such changes could be difficult to implement, given the fact Bitcoin - by design - lacks any central authority." The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.

I'm not sure that is an accurate reflection of the research, but if it is, it is not very good research. Transaction fees can change, and have changed. The minimum transaction fee changed from 0.0005 BTC to 0.0001 BTC during the runup to $1100, to keep transaction fees low enough for small transactions. There is a central organization, The Bitcoin Foundation [bitcoinfoundation.org], whose authority is explicitly derived from consent of the governed; the miners and users choose to update their software to match recommendations by The Bitcoin Foundation.

If that summary is an accurate reflection of the research, it sounds like they don't really know much about how Bitcoin works. I mean, I know that much, and I've only spent a few hours reading about it.

The difficulty of mining scales with the amount of miners. If the amount of miners drops, the difficulty will drop, such that you still get a block every ten minutes or so. Then the only danger is that it is easier to mount a 51% attack, since there's less total mining power. Everyone who transacts in bitcoins will have an incentive to keep the difficulty high enough such that this is unfeasible. Plus, all the transaction fees are optional - you can put out a zero-fee transaction, or a 5 BTC-fee transaction, if you like. If the recommended fees that Bitcoin Core suggests are not sufficient then everybody can just offer more fees.

Bitcoin for all its technical sophistication is more of a threat to "stock exchanges" or "equity allocation" than it ever will be to "currencies"

It is not suitable to a "drive-thru" transactions due to the number of "confirms" required to have veracity in the exchange.

However, it is VERY WELL SUITED to the exchange of equity -- and is, given the current settlement times, much more of a threat to public ledgers like TORRENS (property exchange logs) -- or stock/ownership exchanges.

Except there is a hard cap on the number of Bitcoins, by design. At that point, there will be no more coins to mine, period, at any difficulty.

You are confusing blocks with bitcoins. When the cap on the number of bitcoins is reached, you can still mine blocks, but the incentive for doing so is the transaction fees instead of the new bitcoins created by the new blocks.

Actually, just like with dollars, the creator can choose to inject more BTC into thesystem at any time. That feature was designed into the currency.

And holding some fixed share oof something is not a good thing. That just means it is easy to manipulate by speculators (also just like gold) in comparison to real currencies in which a stable purchasing power is desired.

As for the "many" geeks turned millionaires, that is hogwash. There were a handful of accidental millionaires, but nobody predicted the heights of the bubbles and while many made some money, with the exception of the accidents, all others liquidated at 2-3x value, not 1000-10000x value.

If you invest 100$ into one share, whoever sold you that share now has your 100$.If later you need cash and want so sell your share, but its price is only at 10$, it means that there are buyers willing to pay only 10$ for your share.

Subjectively you could argue that you "lost" 90$. But the person who sold you the share for 100$ could now buy it back from you for 10$ and he would have "won" 90$. In total, the balance of the transactions is 110$. No money has vanished. The value of the commodity has changed, and there are winners and losers of the exchange. One mans loss is the other mans win.